rssWhy the Auto Dealer Exemption Was a Bad Idea
Thursday, July 22, 2010 at 1:04 pm
- 17 Comments
Last year, the U.S. government bailed out auto giant GM at a cost of around $50 billion, gaining 61 percent of the company in the process and expecting around $20 billion in eventual losses. The government also bailed out its lending arm, GMAC, at an upfront cost of $17.2 billion and an expected eventual cost of $6 billion.
Today, backed by that taxpayer largess, GM paid $3.5 billion to purchase a subprime lender, meaning GM will pay taxpayers back in part by selling them more cars at less advantageous interest rates. Plus, Felix Salmon notes, GM did not even get a good deal on the company: “[T]he government is now using taxpayer money to buy out AmeriCredit’s shareholders at a 24 percent premium to Wednesday’s closing price.”
The incident underscores how pointless the auto dealer carve-out in the financial regulatory reform bill is, as well. As a standalone company, in a matter of months, AmeriCredit would have come under the regulatory oversight of the new Consumer Financial Protection Bureau. CFPB regulators would have prevented it from using the industry’s worst practices — bait-and-switch scams, hiding fees and interest rates in the small print, selling unnecessary insurance products or offering subprime loans to prime-qualified customers. But, since GM bought AmeriCredit and will roll its services into the company’s auto dealerships, the CFPB will not be able to do so.
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17 Comments
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Trackback posted July 22, 2010 @ 2:17 pm
Why the Auto Dealer Exemption Was a Bad Idea…
I found your entry interesting do I’ve added a Trackback to it on my weblog :)…
Pingback posted July 22, 2010 @ 2:59 pm
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Comment posted July 22, 2010 @ 5:38 pm
You article is incorrect on two points:
1. “CFPB regulators would have prevented it from using the industry’s worst practices — bait-and-switch scams, hiding fees and interest rates in the small print, selling unnecessary insurance products or offering subprime loans to prime-qualified customers.”
How exactly would the CFPB prevented any of these illegal acts from occuring? What would the CFPB do differently than what the FTC does today to enforce these consumer protection laws? The bill doesn't say.
2. “But, since GM bought AmeriCredit and will roll its services into the company’s auto dealerships, the CFPB will not be able to do so.”
GM doesn't own dealerships. Every bank, credit union and finance company in America will be under the CFPB's jurisdiction — including AmeriCredit.
Pingback posted July 22, 2010 @ 7:21 pm
[...] GM buys AmeriCredit to do sub-prime loansUSA TodayDallas Morning News -New York Times -The Washington Independentall 467 news [...]
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Pingback posted July 22, 2010 @ 7:48 pm
[...] Why the Auto Dealer Exemption Was a Bad Idea « The Washington … [...]
Pingback posted July 22, 2010 @ 8:47 pm
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Comment posted July 22, 2010 @ 7:58 pm
IS, COMMA, AS WELL? Really?
LEARN HOW TO WRITE IN THE ENGLISH LANGUAGE!
A normal human might have written: “The incident underscores ALSO how pointless the auto dealer carve-out in the financial regulatory reform bill is.”
You suck at writing.
Pingback posted July 22, 2010 @ 11:24 pm
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Trackback posted July 25, 2010 @ 11:26 pm
U.S. Faulted for Pushing GM, Chrysler to Speed Dealer Closings…
I didn’t quite follow this to begin with. But when I read it a third time, it all added up in my mind. Thanks for the insight. Definitely something to think about. Thanks for sharing…
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